P.S.T. Trading And Components vs JR Buildway Construction Private Limited

Abni Ranjan Kumar Sinha, J

The present petition is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 read with Rule 6 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by the Petitioner/Operational Creditor, M/s. P.S.T. Trading and Components for initiation of Corporate Insolvency Resolution Process against the Respondent/Corporate Debtor Company JR Buildway Private Limited.

As per averments made in the petition, during the year 2017-18, the Corporate Debtor placed two purchase orders and upon receipt of same, the Operational Creditor supplied the goods under two invoices for a total amounting to Rs. 20,38,499/- inclusive of taxes and against such aforesaid liability amounting to Rs. 20,38,499/-, the Corporate Debtor issued four Post dated cheques and handed over to the Operational Creditor. Amongst four post dated cheques, one post dated cheque amounting to Rs. 5,24,012/- was cleared against Rs. 20,38,499/-which has been duly accounted for in the ledger account maintained by Operational Creditor. However, the remaining three post dated cheques upon presentation were dishonoured by the banker of the Corporate Debtor with a remark "Insufficient balance" in its account. Hence, after adjusting the above received amount of Rs. 5,24,012/- against the entire admitted liability, the closing balance amount of Rs. 15,14,487/- is still lying outstanding against the supplied goods and ever since then no payment has been received thereafter from the Corporate Debtor.

The Operational Creditor is maintaining a ledger account against the supplied goods reflects an outstanding of principle amount of Rs. 15,14,487/- as on date. Upon receipt of the goods supplied under the issued invoices, ever since receiving the goods and till date, the corporate debtor has not raised any dispute/objection with regard to the quantity and specifications as ordered and also with regard to the quality of the supplied goods and has used the same for their business purposes. The Corporate Debtor has also not raised any dispute at any point of time with respect to un paid debt amounting to Rs. 15,14,487/- Since the Corporate debtor has failed to clear the payment as agreed, the Operational Creditor is entitled to receive the interest @30% per annum on principal amount as agreed in the terms of invoices.

The Operational Creditor issued the demand notice dated 09.01.2019 as required under Section 8 of the Code, demanding principal amount of Rs. 15,14,487/- along with interest @ 30% per annum amounting to Rs. 5,65,013/-, total amounting to Rs. 20,79,500/- which was duly served at the site address of the Corporate Debtor situated at Noida and the notice sent at registered office of the Corporate Debtor was returned with the remarks "Unclaimed".

Further, as per the order dated 26.11.2019 of the Adjudicating Authority, none was present on behalf of the Corporate Debtor and the Corporate Debtor was debarred from filing the reply.

We have heard the learned counsel appearing for the Petitioner/Operational Creditor.

The present case has been filed on behalf of the Operational Creditor against the Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code and before filing the present petition, the operational creditor has sent the demand notice as required under section 8 of IBC, through speed post, which is enclosed at Annexure- 5.

Before considering the submissions of the learned counsel for the applicant, we would like to refer the provision under which the notice is required to be sent. Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, lays down that provision of how the notice would be delivered U/s 8 of the IBC. Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is quoted below:-

(1) An operational creditor shall deliver to the corporate debtor, the following documents, namely.-

(a) a demand notice in Form 3; or

(b) a copy of an invoice attached with a notice in Form 4.

(2) The demand notice or the copy of the invoice demanding payment referred to in subsection (2) of section 8 of the Code, may be delivered to the corporate debtor,

(a) at the registered office by hand, registered post or speed post with acknowledgement due; or

(b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.

(3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any.

It is a settled principle of law that there is a difference between the procedure for initiation of CIRP by the Financial Creditors U/s 7 of the IBC and the Operational Creditors U/s 9 of the IBC. So far as the Financial Creditor is concerned, as per Section 7 of the IBC, there is no need to deliver the notice before the initiation of CIRP and that has been decided by the Hon'ble Apex Court in Innoventive Industries Ltd. v. ICICI Bank, (2017)205 Comp Cas 57(SC) held:

"The scheme of Sec 7 stands in contrast with the scheme under Sec 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in sec 8(1) of the Code. Under Sec 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in Sub Section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is preexisting -i.e., before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor goes out of the clutches of the Court.

Therefore for the initiation of CIRP U/s 9 of the IBC by the Operational Creditor, the Operational Creditor is required to deliver the demand notice upon the Corporate Debtor U/s 8 of the IBC. The main object of the inception of provision of Section 8 is, "This ensures that operational creditors, whose debt claims are usually smaller, are not able to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It may also facilitate informal negotiations between such creditors and the corporate debtor, which may result in a restructuring of the debt outside the formal proceedings", and that is the reason in Section 8 of the IBC, the word, 'deliver a demand notice of unpaid operational creditor' is mentioned.

In the light of aforesaid discussion, when we shall consider the case of the applicant, then this Adjudicating Authority is of the considered view that under Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, there are two modes for sending demand notice, one is, either at the registered office by hand, registered post or speed post with acknowledgement due, or second one, by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor, and on the basis of the facts stated in the application, we find, as per rule 5(2) of the insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, the applicant has to send the demand notice either by hand, through registered post or speed post with acknowledgement due at the registered office of the Corporate Debtor or by electronic mail service to a whole time director, designated partner or key managerial personnel of the corporate debtor, and on the basis of the facts stated in the application, we find, the applicant had sent the demand notice on 09.01.2019 at the registered office situated at Mayur Vihar Phase III through the speed post, which was returned as "Unclaimed" and at the site address situated at Noida through the speed post, which was delivered but this address is neither mentioned in the Form-5 of the application nor it is on the Master Data of the Corporate Debtor on the MCA Portal. Therefore, notice sent on that address cannot be treated notice U/S 8 of the Insolvency and Bankruptcy Code, 2016. Therefore, it can be said that the applicant has not delivered notice under Section 8 of Insolvency and Bankruptcy Code, 2016, in accordance with the provision of Rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016 as the demand notice was not delivered at the address of the registered office.

So, under such circumstances, in our opinion, the applicant has not complied with the provision contained under Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, therefore, this Adjudicating Authority is of the considered view that the applicant has not delivered the demand notice as required U/s 8 of the IBC, which is the mandatory provision of law and so on this ground in the absence of delivery of demand notice as required U/s 8 of IBC, the present CP No. (IB)504/ND/2019 filed by the applicant/operational creditor is not complete and not maintainable and liable to be dismissed. Accordingly, it is therefore,

ORDERED

The present CP No. (IB) 504/ND/2019 is hereby dismissed, because the applicant has not complied the provision of Section 8 of Insolvency and Bankruptcy Code, 2016 read with rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. However, the applicant/operational creditor is at liberty to file a fresh case in accordance with the provision of law after delivery of demand notice upon the corporate debtor as per Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.